John P. Tretbar
The spreading coronavirus is ramping up concerns about crude oil demand. The number of infections jumped in Iran, Italy and South Korea, and crude prices took a nosedive, dropping five percent by midday Monday. The Nymex benchmark contract was downs $2.45 to $50.93 per barrel. London Brent was down $2.81 at $55.69.
The world's energy watchdog calls the situation in China "a major global public health emergency" and says its impact is still unfolding around the world. The major slowdown in oil consumption prompted the International Energy Agency to predict the first quarterly decline in worldwide oil demand in more than ten years. In its February Oil Market Report, IEA says it cut its growth forecast for this year to the lowest level since 2011.
Baker Hughes reports 791 active drilling rigs nationwide, an increase of one oil rig. The count in New Mexico was up two, Colorado was down two, and Oklahoma was up one. Canada reports 244 active rigs, down eleven for the week.
The rig count in Western Kansas was up two to sixteen active rigs. Independent Oil & Gas Service reports six active drilling rigs in eastern Kansas, which is unchanged for the week. Drilling was underway on one lease in Stafford County, and operators were about to spud a well in Ellis County.
Operators received 24 permits last week for drilling at new locations across Kansas, 15 of them east of Wichita and nine in Western Kansas. Kansas regulators have approved 109 new drilling permits so far this year.
Independent Oil & Gas Service reports 29 newly-completed wells during the last week, 191 so far this year. There were 12 new completions in eastern Kansas, and seventeen west of Wichita, including one each in Barton, Ellis and Russell counties.
The government reports an increase in U.S. crude oil inventories last week of 400,000 barrels. At 442.9 million barrels, the Energy Information Administration says stockpiles are two percent below the five-year average for this time of year.
U.S. production for the week ending February 14 dipped slightly from the record set the week before. The government said crude-oil production for the week averaged 12.981 million barrels per day. That's down about 6,000 barrels per day from the record set a week earlier.
EIA says U.S. crude imports are down 431,000 barrels per day, to six and a half million barrels per day. The four week average is down more than four percent from the same four-week period last year.
Kansas is tied for sixth in AAA's list of the nation's top ten least expensive gasoline markets. But many markets are seeing big price increases, leading the national average to jump three cents in as many days last week. The national average for regular gasoline was still a dime cheaper than a month ago. Only Texas, Missouri, Mississippi, Louisiana and Oklahoma offer cheaper pump prices than you'll find here in Kansas.
The government now predicts a decline in production next month in four of the nation's top seven shale oil plays. Only the Permian basin of Texas and New Mexico is expected to increase production from February to March. But the U.S. Energy Information Administration's monthly Drilling Productivity Report suggests that the oil production per rig is going up in each of the shale regions.
Regulators in North Dakota say crude production declined in December to 1.48 million [["one point four eight million"]] barrels per day. That's down from 1.5 million [["one point five million"]] the month before. The state's Department of Mineral Resources reported an increase in the amount of natural gas captured at oil wells, and thus the percentage of natural gas being flared at the well head dropped to 16% in December. That's an improvement but still well below the state's goals.
Canadian oil shipments are getting snarled once again as protesters in the eastern half of the country block rail lines into refineries that account for one-third of Canada's capacity. Bloomberg says the halt in traffic could cascade into slowdowns in other areas of the network. This comes just about a week after the second oil-by-rail derailment in as many months in western Canada. Canadian trains hauling crude were ordered to cut their speed for a month because of the derailments. Slowdowns and obstructed train traffic highlight a vulnerability for Canada’s oil patch. Crude producers have grown increasingly reliant on rail to get their supplies to market after pipelines out of Alberta filled to capacity two years ago.
U.S. oil-by-rail shipments increased more than six percent during the week ending February 15 compared to a year earlier. The Association of American Railroads reports the cumulative, year-to-date totals are up 1.6% from the same figure a year ago. Canada reports another big spike, with oil-by-rail increasing more than 30% over a year ago. The year-to-date total there is up more than 25%.
The Trump administration has imposed sanctions on the trading arm of Rosneft, Russia’s biggest state-owned oil company, for Venezuelan crude shipments the government says violate US sanctions. An administration official said anyone engaging with Rosneft Trading risks being sanctioned.
World Oil's annual international drilling and production forecast predicts a rise in global drilling this year. The report says Canadian drilling will decline more than eight percent, while Mexico's exploration will rise nearly 21%. The report says Australia could soon take the top spot in rankings of Liquefied Natural Gas exporters.